A.B.N ANNUAL REPORT

Transcription

1 2016 ANNUAL REPORT

2 30 JUNE 2016 ORION EQUITIES LIMITED CONTENTS CORPORATE DIRECTORY Company Update 2 BOARD Farooq Khan Executive Chairman Directors Report 3 Victor Ho Executive Director Yaqoob Khan Non-Executive Director Remuneration Report 10 Auditor s Independence Declaration 16 COMPANY SECRETARY Victor Ho Consolidated Statement of 17 Profit or Loss and Comprehensive Income PRINCIPAL & REGISTERED OFFICE Level 2 Consolidated Statement of Ventnor Avenue Financial Position West Perth, Western Australia 6005 Consolidated Statement of 19 Telephone: (08) Changes in Equity Facsimile: (08) info@orionequities.com.au Consolidated Statement of Cash Flows 20 Website: Notes to Consolidated Financial 21 AUDITORS Statements Rothsay Auditing Chartered Accountants Directors Declaration 47 Level 1, Lincoln House 4 Ventnor Avenue Independent Audit Report 48 West Perth, Western Australia 6005 Telephone: (08) Additional ASX Information 50 Website: Orion s 2016 Corporate Governance Statement can be found at the following URL on the Company s website: STOCK EXCHANGE Australian Securities Exchange Perth, Western Australia ASX CODE OEQ SHARE REGISTRY Advanced Share Registry Services Main Office 110 Stirling Highway Nedlands, Western Australia 6009 Telephone: (08) Facsimile: (08) admin@advancedshare.com.au Investor Web: Visit for: Sydney Office Market Announcements Suite 8H, 325 Pitt Street Financial Reports Sydney, New South Wales 2000 Corporate Governance Telephone: (02) NTA Backing History Forms Victoria: Telephone: (03) subscription Queensland: Telephone: (07) ANNUAL REPORT 1

3 30 JUNE 2016 ORION EQUITIES LIMITED COMPANY UPDATE Small Holding (Unmarketable Parcel) Share Sale Facility On 6 September 2016, the Company initiated a Small Holding (Unmarketable Parcel) Share Sale Facility 1 in respect of small parcel shareholdings (also sometimes referred to as unmarketable parcels ) valued at $500 or less. Based on the Company s then last sale share price on the ASX of $0.16 (as at the Record Date of 2 September 2016), a small holding under this facility constituted 3,124 or fewer shares. The Company s share register had 134 (out of 309) shareholders holding a small holding and these holders held, in aggregate, 189,968 shares or 1.214% of the Company s total issued share capital (of 15,649,228 shares). The Company s Constitution 2 provides a mechanism by which the Board may, with the agreement of the relevant shareholder, aggregate small holdings and sell them on the shareholders' behalf thereby possibly achieving a higher price for the shares than would have been possible had they been sold as individual small parcels. This initiative allows for the full gross proceeds to be realised by shareholders of such small parcels without any associated brokerage or selling costs (which will be borne by the Company). This initiative will benefit the Company in terms of savings in maintenance costs in relation to share registry fees and also printing, mail-out and postage costs. Furthermore, for some shareholders, the costs of selling their small holdings may result in a proportionally high transaction cost compared to the gross proceeds of sale. Those small holding shareholders as at the Record Date (2 September 2016) have until 5:00pm Perth time on Friday, 21 October 2016 (the Due Date) to lodge a Share Retention Form to retain their shareholding in the Company. The Company will aggregate the small holdings of affected shareholders who have not lodged a Share Retention Form by the Due Date and dispose of them as soon as practicable after that date, having regard to the liquidity of the Company s shares on ASX and market conditions. The aggregated small holdings will be sold on-market with the Company bearing all brokerage and selling costs. Once completed, affected small holders will receive a formal Sale Notice advising of the sale details along with a proceeds cheque for their respective pro-rata share of the gross proceeds of sale (with payment sent to a shareholder s last recorded address) after all small holdings have been sold. Any tax consequences from the sale will be the respective shareholder s responsibility. The Company refers to its ASX market announcement entitled Small Holding (Unmarketable Parcel) Share Sale Facility dated 6 September 2016 for further details in relation to this capital management initiative. As at the date of this report, the Company has not yet completed the sale of the aggregated small parcel shareholdings. Once completed, affected small holders will receive a formal Sale Notice advising of the sale details along with a proceeds cheque. 21 October Refer Orion s ASX announcement dated 6 September 2016: Small Holding (Unmarketable Parcel) Share Sale Facility 2 Clause 152 of the Company s Constitution ANNUAL REPORT 2

4 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT The Directors present their report on Orion Equities Limited ABN (OEQ or the Company) and its controlled entities (Orion or the Consolidated Entity) for the financial year ended 30 June 2016 (Balance Date). Orion Equities Limited is a public company limited by shares that was incorporated in New South Wales and has been listed on the Australian Securities Exchange (ASX) since November 1970 (ASX Code: OEQ). PRINCIPAL ACTIVITIES The principal activities of Orion during the financial year were the management of its investments, including investments in listed and unlisted securities, real estate held for development and resale and an olive grove operation. NET TANGIBLE ASSET BACKING (NTA) Consolidated Entity $ $ Net tangible assets (before tax) 7,502,462 8,093,102 Pre-Tax NTA Backing per share Less deferred tax assets and tax liabilities Net tangible assets (after tax) 7,502,462 8,093,102 Post-Tax NTA Backing per share Based on total issued share capital 15,649,228 15,860,528 FINANCIAL POSITION Consolidated Entity $ $ Cash 78, ,807 Financial assets at fair value through profit and loss 722,445 1,162,119 Investments in listed Associate entity 3,452,593 3,510,526 Property held for development or resale 1,350,000 1,350,000 Receivables 20,391 6,234 Other assets 2,018,780 2,079,277 Deferred tax asset 116, ,424 Total Assets 7,759,779 8,428,387 Other payables and liabilities (140,535) (155,862) Deferred tax liability (116,782) (179,424) Net Assets 7,502,462 8,093,101 Issued capital 18,808,028 18,854,714 Reserves 450, ,643 Accumulated losses (11,755,910) (11,198,255) Total Equity 7,502,462 8,093,101 ANNUAL REPORT 3

5 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT OPERATING RESULTS Consolidated Entity $ $ Total revenues 198, ,057 Total expenses (742,733) (1,062,948) Loss before tax (543,952) (759,891) Income tax benefit - 89,501 Loss attributable to members of the Company (543,952) (670,390) LOSS PER SHARE Consolidated Entity Basic and diluted loss per share (cents) (3.47) (4.22) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic and diluted loss per share 15,694,799 15,898,172 DIVIDENDS The Directors have not declared a dividend in respect of the financial year ended 30 June CAPITAL MANAGEMENT (a) Securities on Issue At the Balance Date, the Company had 15,649,228 shares on issue (2015: 15,860,528). All such shares are listed on ASX. The Company does not have other securities on issue. (b) On-Market Share Buy-Back During the financial year, the Company bought back 211,300 shares on-market at a total cost of $46,686 and at an average buy-back cost (including brokerage) of $0.221 per share, pursuant to an on-market share buy-back, which was first announced on 5 June and which closed on 31 May Refer Orion s ASX announcement dated 5 June 2015: Appendix 3C Announcement of Buy-Back 4 Refer Orion s ASX announcement dated 31 May 2016: Appendix 3F - Final Share Buy-Back Notice ANNUAL REPORT 4

6 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT REVIEW OF OPERATIONS (a) Portfolio Details as at 30 June 2016 Asset Weighting Consolidated Entity % of Net Assets Australian equities 55% 58% Agribusiness 5 27% 25% Property held for development and resale 18% 17% Net tax liabilities (current year and deferred tax assets/liabilities) - - Net cash/other assets and provisions <1% <1% Major Holdings in Securities Portfolio TOTAL 100% 100% Equities Bentley Capital Limited Fair Value $ m % Net Assets ASX Code % BEL Industry Sector Exposures Diversified Financials Strike Resources Limited % SRK Materials CBG Australian Equities Fund (Wholesale) (CBG Fund) % N/A Diversified Other ASX listed securities % Various Various TOTAL % (b) Bentley Capital Limited (ASX: BEL) Bentley Capital Limited (Bentley) is a listed investment company with a current exposure to Australian equities. Orion holds 27.20% (20,513,783 shares) of Bentley s issued ordinary share capital with Queste Communications Ltd (the controlling company of Orion) holding 1.72% (1,300,000 shares) of Bentley s issued ordinary share capital (2015: Orion held 20,513,783 shares (27.42%) and Queste held 1,740,625 shares (2.33%)). Bentley s asset weighting as at 30 June 2016 was 89% Australian equities (2015: 95.2%), 3.7% intangible assets (2015: 3.9%) and 7.2% net cash/other assets (2015: 0.9%). Bentley had net assets of $16.29 million as at 30 June 2016 (2015: $16.43 million) and incurred an after-tax net profit of $0.526 million for the financial year (2015: after-tax net loss of $0.267 million). Bentley paid two 0.50 cent fully franked dividends that were distributed in September 2015 and March 2016 at a total cost of $0.749 million (2015 distributions: a 0.95 cent and a 0.50 cent fully franked dividends, totalling $1.111 million). Orion received $0.205 million distributions from Bentley during the financial year (2015: $0.308 million). Subsequent to 30 June 2016, Bentley announced its intention to pay a fully-franked dividend of 0.5 cent per share. Orion s entitlement to such dividend is expected to be $102, Agribusiness net assets include olive grove land, olive trees, water licence, buildings, plant and equipment ANNUAL REPORT 5

7 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT Bentley has a long distribution track record, as illustrated below: Rate per share Nature Orion s Entitlement Payment Date 0.50 cent Dividend $102, September cent Dividend $102, March cent Dividend $102, September cent Dividend $112, March cent Dividend $194, September 2014 One cent Dividend $205, March 2014 One cent Return of capital $205, December 2013 One cent Return of capital $205, April 2013 One cent Return of capital $205, November 2012 One cent Return of capital $205, April cents Return of capital $1,025, October cents Dividend (Special) $492, September 2011 One cent Dividend $205, September 2011 Note: Bentley has paid a distribution to shareholders every year (save on 4 occasions in its 31 year history) since its admission to ASX in Refer to Bentley s website for full distribution history Shareholders are advised to refer to the 30 June 2016 Full Year Report and monthly NTA disclosures lodged by Bentley for further information about the status and affairs of the company. Information concerning Bentley may be viewed from its website: Bentley s market announcements may also be viewed from the ASX website ( under ASX code BEL. (c) Strike Resources Limited (ASX:SRK) Strike Resources Limited (Strike) owns the high grade Apurimac Magnetite Iron Ore Project and Cusco Magnetite Iron Ore Project in Peru and retains cash reserves of ~$7 million (as at 30 June 2016). Strike has announced that it has examined a range of new strategies for the company in light of the on-going poor outlook for the iron ore sector for further information, refer to Strike s 2016 Full Year Report. 6 On 2 September 2015, Bentley successfully closed its off-market 5.5 cent per share cash takeover bid 7 for Strike with acceptances received totalling 52,553,493 Strike shares (36.16% 8 ), making Bentley the largest shareholder. Orion accepted into the Strike bid in respect of 6,690,802 Strike shares and received the bid consideration of $367,994 on 14 September Orion retains 10,000,000 Strike shares (6.88%) (30 June 2015: 16,690,802 shares (11.48%)). Inclusive of Bentley s relevant interest in Strike (above), Orion has a deemed relevant interest in 62,553,493 Strike shares (43.041% 9 ). Information concerning Strike may be viewed from its website: Strike s market announcements may also be viewed from the ASX website ( under ASX: SRK. 6 Refer Strike s 2016 Full Year Report released on ASX on 31 August Refer Bentley s ASX Announcement dated 31 July 2015: Despatch of Bidders Statement to Holders of Strike Resources Limited 8 Refer Bentley s ASX announcement dated 31 August 2015: Notice of Change in Interests of Substantial Holder in Strike 9 Refer Orion s Change in Substantial Holding Notice dated 4 September 2016 ANNUAL REPORT 6

8 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT (d) Other Assets Orion also owns: a 143 hectare commercial olive grove operation (currently on care and maintenance) with approximately 64,500, 17 year old olive tree plantings located in Gingin, Western Australian; and a property held for redevelopment or sale but currently rented out located in Mandurah, Western Australia. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of Orion that occurred during the financial year not otherwise disclosed in this Directors Report or the financial statements. FUTURE DEVELOPMENTS Orion intends to continue its investment activities in future years. The results of these investment activities depend upon the performance of the underlying companies and securities in which Orion invests. The investments performances depend on many economic factors and also industry and company specific issues. In the opinion of the Directors, it is not possible or appropriate to make a prediction on the future course of markets, the performance of Orion s investments or the forecast of the likely results of Orion s activities. ENVIRONMENTAL REGULATION Orion is not subject to any particular or significant environmental regulation under Australian Commonwealth or State legislation. ANNUAL REPORT 7

9 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT BOARD OF DIRECTORS Information concerning Directors in office during or since the financial year: Farooq Khan Executive Chairman Appointed 23 October 2006 Qualifications Experience BJuris, LLB (Western Australia) Mr Khan is a qualified lawyer having previously practised principally in the field of corporate law. Mr Khan has extensive experience in the securities industry, capital markets and the executive management of ASX-listed companies. In particular, Mr Khan has guided the establishment and growth of a number of public listed companies in the investment, mining and financial services sectors. He has considerable experience in the fields of capital raisings, mergers and acquisitions and investments. Relevant interest in shares 2,000 shares directly 10 Special Responsibilities Other current directorships in listed entities Former directorships in other listed entities in past 3 years Chairman of the Board and the Investment Committee (1) Executive Chairman and Managing Director of Queste Communications Ltd (ASX:QUE) (since 10 March 1998) (2) Executive Chairman of Bentley Capital Limited (ASX:BEL) (director since 2 December 2003) (3) Chairman (appointed 18 December 2015) of Strike Resources Limited (ASX:SRK) (Director since 1 October 2015) None Victor P. H. Ho Executive Director and Company Secretary Appointed Executive Director since 4 July 2003; Company Secretary since 2 August 2000 Qualifications Experience Relevant interest in shares Special Responsibilities Other positions held in listed entities Former positions in other listed entities in past 3 years BCom, LLB (Western Australia), CTA Mr Ho has been in Executive roles with a number of ASX listed companies across the investments, resources and technology sectors over the past 15+ years. Mr Ho is a Chartered Tax Adviser (CTA) and previously had 9 years experience in the taxation profession with the Australian Tax Office (ATO) and in a specialist tax law firm. Mr Ho has been actively involved in the structuring and execution of a number of corporate, M&A and International joint venture (in South America, Indonesia and the Middle East) transactions, capital raisings and capital management initiatives and has extensive experience in public company administration, corporations law and stock exchange compliance and investor/shareholder relations. None Member of Investment Committee (1) Executive Director and Company Secretary of Queste Communications Ltd (ASX:QUE) (Director since 3 April 2013; Company Secretary since 30 August 2000) (2) Company Secretary of Bentley Capital Limited (ASX:BEL) (since 5 February 2004) (3) Director and Company Secretary of Strike Resources Limited (ASX:SRK) (Director since 24 January 2014 and Company Secretary since 1 October 2015) Company Secretary of Alara Resources Limited (ASX:AUQ) (4 April 2007 to 31 August 2015) 10 Refer to Orion s ASX announcement dated 20 November 2014: Change in Directors Interest Notice ANNUAL REPORT 8

10 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT Yaqoob Khan Non-Executive Director Appointed 5 November 1999 Qualifications Experience Relevant interest in shares Special Responsibilities Other current directorships in listed entities Former directorships in other listed entities in past 3 years BCom (Western Australia), Master of Science in Industrial Administration (Carnegie Mellon) Mr Khan holds a Masters degree in Business and has worked as a senior executive responsible for product marketing, costing systems and production management. Mr Khan has been involved in the structuring and ASX listing of a number of public companies and in subsequent executive management. Mr Khan brings considerable international experience in corporate finance and the strategic analysis of listed investments. None None Non-Executive Director of Queste Communications Ltd (ASX:QUE) (since 10 March 1998) None At the Company s 2015 AGM 11 : Victor Ho retired as a Director (by rotation) pursuant to the Company s Constitution and was reelected a Director at that AGM. DIRECTORS' MEETINGS The following table sets out the numbers of meetings of the Company's Directors held during the financial year (including Directors circulatory resolutions), and the numbers of meetings attended by each Director of the Company: Name of Director Meetings Attended Maximum Possible Meetings Farooq Khan 8 8 Victor Ho 9 9 Yaqoob Khan 9 9 Board Committees During the financial year and as at the date of this Directors Report, the Company did not have separate designated Audit or Remuneration Committees. In the opinion of the Directors, in view of the size of the Board and nature and scale of Orion's activities, matters typically dealt with by an Audit or Remuneration Committee are dealt with by the full Board. 11 Refer Orion s ASX announcement dated 12 November 2015: Results of 2015 Annual General Meeting ANNUAL REPORT 9

11 30 JUNE 2016 ORION EQUITIES LIMITED REMUNERATION REPORT This report details the nature and amount of remuneration for each Director and Company Executive (being a company secretary or senior manager) (Key Management Personnel) of Orion. The information provided under headings (1) to (4) below has been audited for compliance with section 300A of the Corporations Act 2001 (Cth) as required under section 308(3C). (1) Remuneration Policy The Board determines the remuneration structure of all Key Management Personnel having regard to the Company s strategic objectives, scale and scope of operations and other relevant factors, including experience and qualifications, length of service, the duties and accountability of Key Management Personnel, the frequency of Board meetings, market practice (including available data concerning remuneration paid by other listed companies and in particular, companies of comparable size and nature) and the objective of maintaining a balanced Board which has appropriate expertise and experience, at a reasonable cost to the Company. Corporate Governance Principles: The Company s Corporate Governance Statement (CGS) also addresses matters pertaining to the Board, Senior Management and Remuneration. The latest version of the CGS may be downloaded from the Company s website: Fixed Cash Short-Term Employment Benefits: The Key Management Personnel of the Company are paid a fixed amount per annum plus applicable employer superannuation contributions. The Non-Executive Directors of the Company are paid a maximum aggregate base remuneration per annum inclusive of employer superannuation contributions where applicable, to be divided as the Board determines appropriate. The Board has determined the following fixed cash remuneration for current Key Management Personnel during the year as follows: Executive Directors (1) Mr Farooq Khan (Executive Chairman) - a base salary of $220,369 per annum inclusive of employer superannuation contributions (9.50% of base salary during the financial year); (2) Mr Victor Ho (Executive Director and Company Secretary) - a base salary of $106,762 per annum inclusive of employer superannuation contributions. Non Executive Director (3) Mr Yaqoob Khan (Non-Executive Director) - a base fee of $25,000 per annum. Special Exertions and Reimbursements: Pursuant to the Company s Constitution, each Director is entitled to receive: (a) (b) Payment for reimbursement of all travelling, hotel and other expenses reasonably incurred by a Director for the purpose of attending meetings of the Board or otherwise in and about the business of the Company; and In respect of Non-Executive Directors, payment for the performance of extra services or the making of special exertions for the benefit of the Company (at the request of and with the concurrence of the Board). Short-Term Benefits: The Company does not have any short-term incentive (STI) cash bonus schemes (or equivalent) in place for Key Management Personnel. Long Term Benefits: Key Management Personnel have no right to termination payments save for payment of accrued unused annual and long service leave (where applicable) (other than Non- Executive Directors). Equity Based Benefits: The Company does not presently have any equity (shares or options) based remuneration arrangements for any personnel pursuant to any executive or employee share or option plan or otherwise. ANNUAL REPORT 10

12 30 JUNE 2016 ORION EQUITIES LIMITED REMUNERATION REPORT Post-Employment Benefits: The Company does not presently provide retirement benefits to Key Management Personnel. The Company notes that shareholder approval is required where a Company proposes to make a termination payment (for example, a payment in lieu of notice, a payment for a post-employment restraint and payments made as a result of the automatic or accelerated vesting of share based payments) in excess of one year s base salary (defined as the average base salary over the previous 3 years) to a director or any person who holds a managerial or executive office. Service Agreements: The Company does not presently have formal service agreements or employment agreements with any Key Management Personnel. Performance-Related Benefits and Financial Performance of Company: The Company does not presently provide short- or long-term incentive/performance based benefits related to the Company s performance to Key Management Personnel, including payment of cash bonuses. The current remuneration of Key Management Personnel is fixed, is not dependent on the satisfaction of a performance condition and is unrelated to the Company s performance. The Board does not believe that it is appropriate at this time to implement an equity-based benefit scheme or a performance related/variable component to Key Management Personnel remuneration or remuneration generally linked to the Company s performance but reserves the right to implement these remuneration measures if appropriate in the future (subject to prior shareholder approval where applicable). In considering the Company's performance and its effects on shareholder wealth, Directors have had regard to the data set out below for the latest financial year and the previous four financial years Loss before income tax ($) (543,953) (670,390) (790,168) (3,055,135) (4,953,167) Basic loss per share (cents) (3.47) (4.22) (4.67) (17.47) (27.94) Dividends paid ($) VWAP share price on ASX for financial year ($) Closing bid share price as at 30 June 2016($) ANNUAL REPORT 11

13 30 JUNE 2016 ORION EQUITIES LIMITED REMUNERATION REPORT (2) Details of Remuneration of Key Management Personnel 2016 Details of the nature and amount of each element of remuneration of each Key Management Personnel paid or payable by the Company during the financial year are as follows: Key Management Personnel Performance related Short-term Benefits Cash, salary and commissions Non-cash benefit Post-Employment Benefits Other Longterm Benefits Long service leave Equity Based Shares and Options Superannuation Total % $ $ $ $ $ $ Executive Directors: Farooq Khan - 206,618-19, ,247 Victor Ho - 78,562-7, ,043 Non-Executive Director: Yaqoob Khan - 25, , Key Management Personnel Performance related Short-term Benefits Cash, salary and commissions Non-cash benefit Post-Employment Benefits Other Longterm Benefits Long service leave Equity Based Shares and Options Superannuation Total % $ $ $ $ $ $ Executive Directors: Farooq Khan - 238,101-22,802 1, ,826 Victor Ho - 68,750-13, ,125 Non-Executive Director: Yaqoob Khan - 29,000 * ,000 * Includes fees received for the performance of extra services or the making of special exertions at the request of the Board and for the purposes of the Company. Victor Ho is also Company Secretary of the Company. (3) Other Benefits Provided to Key Management Personnel No Key Management Personnel has during or since the end of the 30 June 2016 financial year, received or become entitled to receive a benefit, other than a remuneration benefit as disclosed above, by reason of a contract made by the Company or a related entity with the Director or with a firm of which he is a member, or with a Company in which he has a substantial interest. (4) Engagement of Remuneration Consultants The Company has not engaged any remuneration consultants to provide remuneration recommendations in relation to Key Management Personnel during the year. The Board has established a policy for engaging external Key Management Personnel remuneration consultants which includes, inter alia, that the Non-Executive Directors on the Remuneration Committee be responsible for approving all engagements of and executing contracts to engage remuneration consultants and for receiving remuneration recommendations from remuneration consultants regarding Key Management Personnel. Furthermore, the Company has a policy that remuneration advice provided by remuneration consultants be quarantined from Management where applicable. ANNUAL REPORT 12

14 30 JUNE 2016 ORION EQUITIES LIMITED REMUNERATION REPORT (5) Shares held by Key Management Personnel The number of ordinary shares in the Company during the 2016 reporting period held by Key Management Personnel, including their related parties are set below: Balance at Received as part Balance at Key Management Personnel 30 June 2015 Additions of remuneration Disposals 30 June 2016 Executive Directors: Farooq Khan 2, ,000 Victor Ho Non-Executive Director: Yaqoob Khan Note: The disclosures of shareholdings above are in accordance with the accounting standards which require disclosure of shares held directly, indirectly or beneficially by each key management person, a close member of the family of that person, or an entity over which either of these persons have, directly or indirectly, control, joint control or significant influence (as defined under Accounting Standard AASB 124 Related Party Disclosures). (6) Voting and Comments on Remuneration Report at 2015 AGM At the Company s most recent (2015) AGM, a resolution to adopt the prior year (2015) Remuneration Report was put to the vote and passed unanimously on a show of hands with the proxies received also indicating majority (91.4%) support in favour of adopting the Remuneration Report. 12 No comments were made on the Remuneration Report that was considered at the AGM. This concludes the audited Remuneration Report. 12 Refer Orion s ASX announcement dated 12 November 2015: Results of 2015 Annual General Meeting ANNUAL REPORT 13

15 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT DIRECTORS AND OFFICERS INSURANCE The Company insures Directors and Officers against liability they may incur in respect of any wrongful acts or omissions made by them in such capacity (to the extent permitted by the Corporations Act 2001 (Cth)) (D&O Policy). Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. DIRECTORS DEEDS In addition to the rights of indemnity provided under the Company s Constitution (to the extent permitted by the Corporations Act), the Company has also entered into a deed with each of the Directors to regulate certain matters between the Company and each Director, both during the time the Director holds office and after the Director ceases to be an officer of the Company, including the following matters: (a) (b) The Company s obligation to indemnify a Director for liabilities or legal costs incurred as an officer of the Company (to the extent permitted by the Corporations Act); and Subject to the terms of the deed and the Corporations Act, the Company may advance monies to the Director to meet any costs or expenses of the Director incurred in circumstances relating to the indemnities provided under the deed and prior to the outcome of any legal proceedings brought against the Director. LEGAL PROCEEDINGS ON BEHALF OF CONSOLIDATED ENTITY No person has applied for leave of a court to bring proceedings on behalf of Orion or intervene in any proceedings to which Orion is a party for the purpose of taking responsibility on behalf of Orion for all or any part of such proceedings. Orion was not a party to any such proceedings during and since the financial year. AUDITORS The Company has changed its Auditors from BDO to Rothsay Auditing (a firm of Chartered Accountants with offices in Perth and Sydney), with effect on 12 February The transition of Auditors occurred as part of a review of the Company s corporate administration costs Rothsay was selected after considering proposals received from BDO and a number of other audit firms. Rothsay will hold office as Auditor until the next annual general meeting of the Company, at which time shareholder approval will be sought for their re-appointment and continuation as Auditor. Details of the amounts paid or payable by the Company to the Auditors for audit and non-audit (tax services) services provided during the financial year are set out below: Auditor Audit & Review Fees Non-Audit Services Total $ $ $ Rothsay Auditing 22,000-22,000 BDO Audit (WA) Pty Ltd - 3,451 3, Refer Orion s ASX announcement dated 12 February 2016: Change of Auditors. ANNUAL REPORT 14

16 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS REPORT The Board is satisfied that the provision of non-audit services by the auditor during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The Board is satisfied that the nature of the non-audit services disclosed above did not compromise the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor s own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. Rothsay Auditing continues in office in accordance with section 327 of the Corporations Act 2001 (Cth). AUDITOR S INDEPENDENCE DECLARATION A copy of the Auditor s Independence Declaration as required under section 307C of the Corporations Act 2001 (Cth) forms part of this Directors Report and is set out on page 16. This relates to the Audit Report, where the Auditors state that they have issued an independence declaration. EVENTS SUBSEQUENT TO BALANCE DATE The Directors are not aware of any matters or circumstances at the date of this Directors Report, other than those referred to in this Directors Report (in particular, in the Review of Operations) or the financial statements or notes thereto (in particular Note 27), that have significantly affected or may significantly affect the operations, the results of operations or the state of affairs of the Company in subsequent financial years. Signed for and on behalf of the Directors in accordance with a resolution of the Board, Farooq Khan Chairman Victor Ho Company Secretary 31 August 2016 ANNUAL REPORT 15

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18 30 JUNE 2016 ORION EQUITIES LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Note $ $ Revenue 2 50,477 62,968 Other Net gain on financial assets at fair value through profit or loss - 136,759 Share of net profit of Associate entity 147,205 - Reversal of impairment - olive grove land - 101,296 Other income 1,099 2,034 TOTAL REVENUE AND INCOME 198, ,057 EXPENSES 3 Net loss on financial assets at fair value through profit or loss (37,868) - Share of net loss of Associate entity - (73,783) Olive grove operation expenses (60,763) (71,808) Impairment loss on property held for development or resale - (140,000) Land operation expenses (15,156) (7,217) Personnel expenses (484,190) (559,781) Occupancy expenses (27,845) (53,471) Corporate expenses (26,022) (27,628) Communication expenses (4,690) (6,480) Finance expenses (2,762) (2,484) Administration expenses (83,438) (120,296) LOSS BEFORE INCOME TAX (543,953) (759,891) Income tax expense 5-89,501 LOSS FOR THE YEAR (543,953) (670,390) OTHER COMPREHENSIVE INCOME Revaluation of assets, net of tax - 208,837 TOTAL COMPREHENSIVE LOSS FOR THE YEAR (543,953) (461,553) LOSS PER SHARE FOR LOSS ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY Basic and diluted loss per share (cents) 6 (3.47) (4.22) The accompanying notes form part of these financial statements ANNUAL REPORT 17

19 30 JUNE 2016 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2016 ORION EQUITIES LIMITED Note CURRENT ASSETS $ $ Cash and cash equivalents 7 78, ,807 Financial assets at fair value through profit or loss 8 722,445 1,162,119 Receivables 11 20,391 6,234 Other current assets 4,785 4,828 TOTAL CURRENT ASSETS 826,409 1,313,988 NON CURRENT ASSETS Receivables - 18,333 Investment in Associate entity 22 3,452,593 3,510,526 Property held for development or resale 12 1,350,000 1,350,000 Property, plant and equipment 13 1,948,495 1,990,616 Olive trees 14 65,500 65,500 Deferred tax asset 5 116, ,424 TOTAL NON CURRENT ASSETS 6,933,370 7,114,399 TOTAL ASSETS 7,759,779 8,428,387 CURRENT LIABILITIES Payables 15 93, ,290 Provisions 16 47,509 36,572 TOTAL CURRENT LIABILITIES 140, ,862 NON CURRENT LIABILITIES Deferred tax liability 5 116, ,424 TOTAL NON CURRENT LIABILITIES 116, ,424 TOTAL LIABILITIES 257, ,286 NET ASSETS 7,502,462 8,093,101 EQUITY Issued capital 17 18,808,028 18,854,714 Reserves , ,643 Accumulated losses (11,755,910) (11,198,256) TOTAL EQUITY 7,502,462 8,093,101 The accompanying notes form part of these financial statements ANNUAL REPORT 18

20 30 JUNE 2016 ORION EQUITIES LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Note Accumulated Issued Capital Reserves Losses Total $ $ $ $ BALANCE AT 1 JULY ,865, ,806 (10,527,866) 8,565,149 Loss for the year - - (670,390) (670,390) Other comprehensive income - 208, ,837 Total comprehensive loss for the year - 208,837 (670,390) (461,553) Transactions with owners in their capacity as owners: Share buy-back 17 (10,495) - - (10,495) BALANCE AT 30 JUNE ,854, ,643 (11,198,256) 8,093,101 BALANCE AT 1 JULY ,854, ,643 (11,198,256) 8,093,101 Loss for the year - - (543,953) (543,953) Profit reserve transfer - 13,701 (13,701) - Other comprehensive income Total comprehensive loss for the year - 13,701 (557,654) (543,953) Share buy-back 17 (46,686) - - (46,686) BALANCE AT 30 JUNE ,808, ,344 (11,755,910) 7,502,462 The accompanying notes form part of these financial statements ANNUAL REPORT 19

21 30 JUNE 2016 ORION EQUITIES LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS Note $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 44,200 44,200 Dividends received 208, ,933 Interest received 3,145 6,542 Other income received 1,099 2,034 Payments to suppliers and employees (672,718) (819,865) Interest paid (27) (71) Sale of financial assets at fair value through profit or loss 504, ,541 Purchase of financial assets at fair value through profit or loss (102,305) (361,539) NET CASH (USED IN)/PROVIDED BY CONTINUING OPERATIONS (14,226) (554,225) Net Cash Used in Discontinued Operations - 9,369 NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES 7 (14,226) (544,856) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of olive oil operations - 101,994 Purchase of plant and equipment 13 (1,107) (7,526) NET CASH PROVIDED BY INVESTING ACTIVITIES (1,107) 94,468 CASH FLOWS FROM INVESTING ACTIVITIES Share buy-back 17 (46,686) (10,495) NET CASH USED IN INVESTING ACTIVITIES (46,686) (10,495) NET INCREASE/(DECREASE) IN CASH HELD (62,019) (460,883) Cash and Cash Equivalents at Beginning of Financial Year 140, ,690 CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 7 78, ,807 The accompanying notes form part of these financial statements ANNUAL REPORT 20

22 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ABOUT THIS REPORT 1.1 Background This financial report covers the consolidated financial statement of the consolidated entity consisting of Orion Equities Limited (the Company), its subsidiaries and investments in associates (the Consolidated Entity or Orion). The financial report is presented in the Australian currency. Orion Equities Limited is a company limited by shares, incorporated in New South Wales, Australia and whose shares are publicly traded on the Australian Securities Exchange (ASX). These financial statements have been prepared on a streamlined basis where key information is grouped together for ease of understanding and readability. The notes include information which is required to understand the financial statements and is material and relevant to the operations, financial position and performance of the Consolidated Entity. Information is considered material and relevant if, for example: (a) (b) (c) (d) the amount in question is significant because of its size or nature; it is important for understanding the results of the Consolidated Entity; it helps to explain the impact of significant changes in the Consolidated Entity s business for example, acquisitions; or it relates to an aspect of the Consolidated Entity s operations that is important to its future performance. The notes are organised into the following sections: (a) (b) Key Performance: Provides a breakdown of the key individual line items in the statement of comprehensive income that the Directors consider most relevant to understanding performance and shareholder returns for the year: Notes 2 Revenue 3 Expenses 4 Segment information 5 Income tax 6 Loss per share Financial Risk Management: Provides information about the Consolidated Entity s exposure and management of various financial risks and explains how these affect the Consolidated Entity s financial position and performance: Notes 7 Cash and cash equivalents Financial assets at fair value through 8 profit or loss 9 Financial risk management Fair value measurement of financial 10 instruments (c) (d) (e) (f) Other Assets and Liabilities: Provides information on other balance sheet assets and liabilities that do not materially affect performance or give rise to material financial risk: Notes 11 Receivables 12 Property held for resale 13 Property, plant and equipment 14 Olive trees 15 Payables 16 Provisions Capital Structure: This section outlines how the Consolidated Entity manages its capital structure and related financing costs, as well as capital adequacy and reserves. It also provides details on the dividends paid by the Company: Notes 17 Issued capital 18 Reserves 19 Capital risk management Consolidated Entity Structure: Provides details and disclosures relating to the parent entity of the Consolidated Entity, controlled entities, investments in associates and any acquisitions and/or disposals of businesses in the year. Disclosure on related parties is also provided in the section: Notes 20 Parent entity information 21 Investment in controlled entities 22 Investment in associate entity 23 Related party transactions Other: Provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements however, are not considered significant in understanding the financial performance or position of the Consolidated Entity: Notes 24 Auditors' remuneration 25 Commitments 26 Contingencies 27 Events occurring after the reporting period Significant and other accounting policies that summarise the measurement basis used and presentation policies and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. ANNUAL REPORT 21

23 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.2. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australia Accounting Interpretations and the Corporations Act 2001 (Cth), as appropriate for for-profit entities. Compliance with IFRS The consolidated financial statements of the Consolidated Entity also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Reporting Basis and Conventions 1.6. Impairment of Assets At each reporting date, the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, is compared to the asset s carrying value. Any excess of the asset s carrying value over its recoverable amount is expensed to the profit or loss. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied Principles of Consolidation The consolidated financial statements incorporate the assets and liabilities of the subsidiaries of Orion Equities Limited as at 30 June 2016 and the results of its subsidiaries for the year then ended. Orion Equities Limited and its subsidiaries are referred to in this financial report as the Consolidated Entity. All inter-company balances and transactions between entities in the Consolidated Entity, including any unrealised profits or losses, have been eliminated on consolidation Comparative Figures Certain comparative figures have been adjusted to conform to changes in presentation for the current financial year Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. ANNUAL REPORT 22

24 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.7. Summary of Accounting Standards Issued but not yet Effective The following new Accounting Standards and Interpretations (which have been released but not yet adopted) have no material impact on the Consolidated Entity s financial statements or the associated notes therein. AASB reference Title and Affected Standard(s) Nature of Change Application date AASB 9 Financial Instruments Classification and measurement AASB 9 amendments the classification and measurement of financial assets: Financial assets will either be measured at amortised cost, fair value through other comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL). Financial assets are measured at amortised cost or FVTOCI if certain restrictive conditions are met. All other financial assets are measured at FVTPL. All investments in equity instruments will be measured at fair value. For those investments in equity instruments that are not held for trading, there is an irrevocable election to present gains and losses in OCI. Dividends will be recognised in profit or loss Annual reporting periods beginning on or after January 2018 The following requirements have generally been carried forward unchanged from AASB 139 Financial Instruments: Recognition and Measurement into AASB 9: Classification and measurement of financial liabilities, and Derecognition requirements for financial assets and liabilities. However, AASB 9 requires that gains or losses on financial liabilities measured at fair value are recognised in profit or loss, except that the effects of changes in the liability s credit risk are recognised in other comprehensive income. Impairment The new impairment model in AASB 9 is now based on an expected loss model rather than an incurred loss model. A complex three stage model applies to debt instruments at amortised cost or at fair value through other comprehensive income for recognising impairment losses. A simplified impairment model applies to trade receivables and lease receivables with maturities that are less than 12 months. For trade receivables and lease receivables with maturity longer than 12 months, entities have a choice of applying the complex three stage model or the simplified model. ANNUAL REPORT 23

25 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.5 Summary of Accounting Standards Issued but not yet Effective (continued) AASB reference Title and Affected Standard(s) Nature of Change Application date AASB Amendments to Australian Accounting Standards - Equity Method in Separate Financial Statements Currently, investments in subsidiaries, associates and joint ventures are accounted for in separate financial statements at cost or at fair value under AASB 139/AASB 9. These amendments provide an additional option to account for these investments using the equity method as described in AASB 128 Investments in Associates and Joint Ventures. Annual periods beginning on or after 1 January 2016 AASB Amendments to Australian Accounting Standards Sale or Contribution of Assets between an Investor and its Associate or Joint Venture AASB amends AASB 10 Consolidated Financial Statements and AASB 128 to address an inconsistency between the requirements in AASB 10 and those in AASB 128 (August 2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require: A full gain or loss to be recognised when a transaction involves a business (whether it is housed in a subsidiary or not) A partial gain or loss to be recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. Annual periods beginning on or after 1 January 2018 IFRS 15 Revenue from contracts with customers An entity will recognise revenue to depict the transfer of promised good or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This means that revenue will be recognised when control of goods or services is transferred, rather than on transfer of risks and rewards as is currently the case under IAS 18 Revenue. Annual reporting periods beginning on or after 1 January 2018 AASB 16 Leases The key features of AASB 16 are as follows: Lessee accounting Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. Annual reporting periods beginning on or after 1 January 2019 AASB 16 also contains disclosure requirements for lessees. ANNUAL REPORT 24

26 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 2. REVENUE The consolidated loss before income tax includes the following items of revenue: Revenue $ $ Rental revenue 44,200 44,200 Dividend revenue 3,132 12,226 Interest revenue 3,145 6,542 Other 50,477 62,968 Net gain on financial assets at fair value through profit or loss - 136,759 Share of net profit of Associate entity 147,205 - Reversal of impairment - olive grove land - 101,296 Other income 1,099 2, , ,057 Accounting policy Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured. All revenue is stated net of the amount of Goods and Services Tax (GST) except where the amount of GST incurred is not recoverable from the Australian Tax Office. The following specific recognition criteria must also be met before revenue is recognised: (a) Sale of financial assets, goods and other assets Revenue from the sale of financial assets, goods or other assets is recognised when the Consolidated Entity has passed control of the financial assets, goods or other assets to the buyer (b) Interest revenue Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. (c) Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established. The Consolidated Entity brings dividend revenue to account on the applicable ex-dividend entitlement date (d) Other revenues Other revenues are recognised on a receipts basis. ANNUAL REPORT 25

27 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. EXPENSES The consolidated loss before income tax includes the following items of expenses: $ $ Net loss on financial assets at fair value through profit or loss 37,868 - Share of net loss of Associate entity - 73,783 Olive grove operations Depreciation of olive grove assets 41,071 51,602 Other expenses 19,692 20,206 Land operations Impairment loss on property held for development or resale - 140,000 Other expenses 15,156 7,217 Salaries, fees and employee benefits 484, ,781 Occupancy expenses 27,845 53,471 Finance expenses 2,762 2,484 Communications 4,690 6,480 Corporate expenses ASX fees 15,894 18,059 Share registry 7,281 7,372 Other corporate expenses 2,847 2,197 Administration expenses Professional fees 14,643 15,115 Legal fees 17,744 22,763 Depreciation 2,157 2,653 Other administration expenses 48,894 79, ,734 1,062, SEGMENT INFORMATION Investments Olive grove Corporate Total 2016 $ $ $ $ Segment revenues Revenue 50, ,477 Other 147,205-1, ,304 Total segment revenues 197,682-1, ,781 Personnel expenses , ,190 Finance expenses - (86) 2,942 2,856 Administration expenses - 8,075 77,277 85,352 Depreciation expense - 41,071 2,157 43,228 Other expenses 50,484 11,703 64, ,108 Total segment profit/(loss) 147,198 (60,763) (630,388) (543,953) ANNUAL REPORT 26

28 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. SEGMENT INFORMATION (continued) Investments Olive grove Corporate Total 2016 $ $ $ $ Segment assets Cash and cash equivalents ,788 78,788 Financial assets 722, ,445 Property held for development or resale 1,350, ,350,000 Investment in Associate 3,452, ,452,593 Property, plant and equipment - 1,941,359 7,136 1,948,495 Other assets - 66, , ,458 Total segment assets 5,525,038 2,008, ,617 7,759, Segment revenues Revenue 62, ,968 Other 136, ,296 2, ,089 Total segment revenues 199, ,296 2, ,057 Personnel expenses - 2, , ,592 Finance expenses ,675 2,988 Administration expenses - 3,508 91,025 94,533 Depreciation expense - 51,602 3,445 55,047 Other expenses 225,875 13, , ,788 Total segment profit/(loss) (26,148) 29,488 (763,231) (759,891) Segment assets Cash and cash equivalents - 5, , ,807 Financial assets 1,162, ,162,119 Property held for development or resale 1,350, ,350,000 Investment in Associate 3,510, ,510,526 Property, plant and equipment - 1,982,430 8,186 1,990,616 Other assets - 67, , ,319 Total segment assets 6,022,645 2,055, ,994 8,428,387 Accounting policy The operating segments are reported in a manner consistent with the internal reporting provided to the "Chief Operating Decision Maker" (CODM). The Consolidated Entity's CODM is the Board of Directors who are responsible for allocating resources and assessing performance of the operating segments. The Board has considered the business and geographical perspectives of the operating results and determined that the Consolidated Entity operates only within Australia, with the main segments being Investments and Olive Grove. Corporate items are mainly comprised of corporate assets, office expenses and income tax assets and liabilities. ANNUAL REPORT 27

29 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. SEGMENT INFORMATION (continued) Description of segments (a) (b) (c) Investments comprise of equity investments of companies listed on the Australian Securities Exchange (ASX) and liquid financial assets; Olive grove is in relation to the olive grove farm in Gingin; Corporate items are mainly comprised of corporate assets, office expenses and income tax assets and liabilities. Liabilities Liabilities are not reported to the CODM by segment. All liabilities are assessed at a consolidated entity level. 5. INCOME TAX The components of tax expense/(benefit) comprise: $ $ Current tax - - Deferred tax - (89,501) - (89,501) (a) The prima facie tax on operating loss before income tax is reconciled to the income tax as follows: Prima facie tax payable on operating loss before income tax at 28.5% (2015: 30%) Adjust tax effect of: (155,026) (211,661) Other assessable income 84, ,310 Non-deductible expenses 7,112 7,196 Share of net (profit)/loss of Associate entity (41,953) 22,135 Current year tax losses not brought to account 104,908 (39,481) Income tax attributable to entity - (89,501) (b) Deferred tax assets Employee benefits and accruals 22,220 22,916 Fair value losses 94, , , ,424 Deferred tax liabilities Fair value gains 116, ,424 Other , ,424 ANNUAL REPORT 28

30 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 5. INCOME TAX (continued) Employee benefits Fair value losses (i) Movements - deferred tax assets $ $ $ At 1 July ,838 75,762 98,600 Credited/(charged) to income statement 78 80,746 80,824 At 30 June , , ,424 Total At 1 July , , ,424 Credited/(charged) to income statement (696) (61,946) (62,642) At 30 June ,220 94, ,782 Fair value gains Other (ii) Movements - Deferred tax liabilities $ $ $ At 1 July , ,600 Credited/(charged) to income statement 89,501-89,501 Charged to equity (7,708) (969) (8,677) At 30 June , ,424 Total At 1 July , ,424 Credited/(charged) to income statement (62,642) - (62,642) At 30 June , , (iii) Deferred tax recognised directly in other comprehensive income $ $ Revaluations of land and intangible assets - (89,501) Unrecognised deferred tax balances Unrecognised deferred tax asset - revenue losses 2,742,068 2,574,842 Unrecognised deferred tax asset - capital losses 28,388 28,388 2,770,456 2,603,230 Critical accounting judgement and estimate The above deferred tax assets have not been recognised in respect of the above items because it is not probable that future taxable profit will be available against which the Consolidated Entity can utilise the benefits. Revenue and capital tax losses are subject to relevant statutory tests. Tax Consolidation The head entity, Orion Equities Limited and its controlled entities have formed a tax consolidated group with effect from 29 June The members of the tax consolidation group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets (as appropriate) arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements within the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group. ANNUAL REPORT 29

31 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. INCOME TAX (continued) Any differences between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. Accounting policy The income tax expense or revenue for the period is the tax payable on the current period s taxable income based on the notional income tax rate for each taxing jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses (if applicable). Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each taxing jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The amount of deferred tax assets benefits brought to account or which may be realised in the future, is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Consolidated Entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in other comprehensive income or equity are also recognised directly in other comprehensive income or equity. 6. LOSS PER SHARE Basic and diluted loss per share (cents) (3.47) (4.22) The following represents the loss and weighted average number of shares used in the loss per share calculations: Net loss after income tax ($) (543,953) (670,390) Number of Shares Weighted average number of ordinary shares 15,694,799 15,898,172 ANNUAL REPORT 30

32 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. LOSS PER SHARE (continued) The Consolidated Entity has no securities outstanding which have the potential to convert to ordinary shares and dilute the basic loss per share. Accounting policy Basic earnings/loss per share is determined by dividing the operating result after income tax by the weighted average number of ordinary shares on issue during the financial period. Diluted earnings/loss per share adjusts the figures used in the determination of basic earnings/loss per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings/loss per share that will probably arise from the exercise of options outstanding during the financial period. 7. CASH AND CASH EQUIVALENTS $ $ Cash at bank 78, ,807 Accounting policy Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts (if any) are shown within short-term borrowings in current liabilities on the Statement of Financial Position. Reconciliation of operating loss after income tax to net cash used in operating activities $ $ Loss after income tax (543,953) (670,390) Add non-cash items: Depreciation 43,228 54,255 Write off of fixed assets Net loss/(gain) on financial assets at fair value through profit or loss 37,868 (126,393) Loss on land held for development or resale - 140,000 Loss on revaluation of land - (101,296) Share of net (profit)/loss of Associate entity (147,205) 73,783 Changes in Assets and Liabilities: Financial assets at fair value through profit or loss 401,805 (117,364) Receivables 4,176 10,380 Other current assets Investment in Associate entity 205, ,707 Payables (26,264) (24,278) Provisions 10,938 (2,030) Deferred tax - (89,501) (14,226) (544,856) ANNUAL REPORT 31

33 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS $ $ Listed securities at fair value 456, ,038 Unlisted managed fund at fair value 266, , ,445 1,162,119 Accounting policy Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition, financial assets at fair value through profit and loss acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139 (Recognition and Measurement of Financial Instruments) will recognise its realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date which is the current bid price. The fair value of the unlisted managed fund is determined from unit price information provided by investment manager. The Consolidated Entity s investment portfolio is accounted for as a financial assets at fair value through profit and loss and is carried at fair value. 9. FINANCIAL RISK MANAGEMENT The Consolidated Entity's financial instruments consist of deposits with banks, accounts receivable and payable, investments in listed securities, and other unlisted securities. The principal activity of the Consolidated Entity is the management of its investments (Financial Assets at Fair Value through Profit and Loss) (refer Note 8). The Consolidated Entity's investments are subject to market (which includes interest rate and price risk), credit and liquidity risks. The Board of Directors is responsible for the overall internal control framework (which includes risk management) but no cost-effective internal control system will preclude all errors and irregularities. The system is based, in part, on the appointment of suitably qualified management personnel. The effectiveness of the system is continually reviewed by management and at least annually by the Board. The financial receivables and payables of the Consolidated Entity in the table below are due or payable within 30 days. The financial investments are held for trading and are realised at the discretion of the Board of Directors. The Consolidated Entity holds the following financial assets and liabilities: Note $ $ Cash and cash equivalents 7 78, ,807 Financial assets at fair value through profit or loss 8 722,445 1,162,119 Receivables 11 20,391 6, ,624 1,309,160 Payables 15 (93,026) (119,290) Net financial assets 728,598 1,189,870 ANNUAL REPORT 32

34 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 9. FINANCIAL RISK MANAGEMENT (continued) (a) Market risk Market risk is the risk that the fair value and/or future cash flows from a financial instrument will fluctuate as a result of changes in market factors. Market risk comprises of price risk from fluctuations in the fair value of equities and interest rate risk from fluctuations in market interest rates. (i) Price risk The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and classified in the Statement of Financial Position at fair value through profit or loss. The Consolidated Entity is not exposed to commodity price risk, save where this has an indirect impact via market risk and equity securities price risk. The value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments in the market. By its nature as an investment company, the Consolidated Entity will always be subject to market risk as it invests its capital in securities that are not risk free - the market price of these securities can and will fluctuate. The Consolidated Entity does not manage this risk through entering into derivative contracts, futures, options or swaps. Equity price risk is minimised through ensuring that investment activities are undertaken in accordance with Board established mandate limits and investment strategies. The Consolidated Entity has performed a sensitivity analysis on its exposure to market price risk at balance date. The analysis demonstrates the effect on the current year results and equity which could result from a change in these risks. The ASX All Ordinaries Accumulation Index was utilised as the benchmark for the unlisted and listed share investments which are financial assets availablefor-sale or at fair value through profit or loss. ASX All Ordinaries Accumulation Index Impact on post-tax profit Impact on other components of equity $ $ $ $ Increase 15% 10, ,963 10, ,963 Decrease 15% (10,905) (107,963) (10,905) (107,963) (ii) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Consolidated Entity's exposure to market risk for changes in interest rates relate primarily to investments held in interest bearing instruments. The weighted average interest rate for the year for the table below is 1.35% (2015: 1.85%). The revenue exposure is immaterial in terms of the possible impact on profit or loss or total equity. Cash at bank $ $ 78, ,807 ANNUAL REPORT 33

35 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 9. FINANCIAL RISK MANAGEMENT (continued) (b) Credit risk Credit risk refers to the risk that a counterparty under a financial instrument will default (in whole or in part) on its contractual obligations resulting in financial loss to the Consolidated Entity. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, including outstanding receivables and committed transactions. Concentrations of credit risk are minimised primarily by undertaking appropriate due diligence on potential investments, carrying out all market transactions through approved brokers, settling non-market transactions with the involvement of suitably qualified legal and accounting personnel (both internal and external), and obtaining sufficient collateral or other security (where appropriate) as a means of mitigating the risk of financial loss from defaults. The Consolidated Entity's business activities do not necessitate the requirement for collateral as a means of mitigating the risk of financial loss from defaults. The credit quality of the financial assets are neither past due nor impaired and can be assessed by reference to external credit ratings (if available with Standard & Poor's) or to historical information about counterparty default rates. The maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as summarised below: Cash and Cash Equivalents $ $ AA- 40, ,331 A- 37,773 2,476 77, ,807 Receivables (due within 30 days) No external credit rating available 20,391 6,234 The Consolidated Entity measures credit risk on a fair value basis. The carrying amount of financial assets recorded in the financial statements, net any provision for losses, represents the Consolidated Entity's maximum exposure to credit risk. (c) Liquidity Risk Liquidity risk is the risk that the Consolidated Entity will encounter difficulty in meeting obligations associated with financial liabilities. The Consolidated Entity has no borrowings. The Consolidated Entity's non-cash investments can be realised to meet trade and other payables arising in the normal course of business. The financial liabilities disclosed in the above table have a maturity obligation of not more than 30 days. 10. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS Fair Value Hierarchy AASB 13 (Fair Value Measurement) requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (i) (ii) (iii) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). ANNUAL REPORT 34

36 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 10. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued) Level 1 Level 2 Level 3 Total 2016 $ $ $ $ Financial assets at fair value through profit or loss: Listed securities at fair value 456, ,195 Unlisted managed fund at fair value - 266, ,250 Land at Independent Valuation - - 1,741,664 1,741,664 Olive Trees ,500 65,500 Total 456, ,250 1,807,164 2,529, Financial assets at fair value through profit or loss: Listed securities at fair value 901, ,038 Unlisted managed fund at fair value ,081 Land at independent valuation - - 1,741,664 1,741,664 Olive Trees ,500 65,500 Total 901, ,081 1,807,164 2,969,283 There have been no transfers between the levels of the fair value hierarchy during the financial year. Accounting policy The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the Balance Date. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market (for example over-thecounter derivatives) is determined using valuation techniques, including but not limited to recent arm s length transactions, reference to similar instruments and option pricing models. The Consolidated Entity may use a variety of methods and makes assumptions that are based on market conditions existing at each Balance Date. Other techniques, such as estimated discounted cash flows, are used to determine fair value for other financial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. The Consolidated Entity s investment portfolio (comprising listed and unlisted securities) is accounted for as financial assets at fair value through profit and loss and is carried at fair value based on the quoted last bid prices at the reporting date (refer Note 8). ANNUAL REPORT 35

37 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued) (a) Valuation techniques The fair value of the listed securities traded in active markets is based on closing bid prices at the end of the reporting period. These investments are included in Level 1. The fair value of any assets that are not traded in an active market are determined using certain valuation techniques. The valuation techniques maximise the use of observable market data where it is available, or independent valuation and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The fair value of the unlisted managed fund invested is valued at the audited unit price published by the investment manager and as such this financial instrument is included in Level 2. At Level 3, the land was valued by an independent qualified valuer (a Certified Practising Valuer and Associate Member of the Australian Property Institute) as at 30 June These assets have been valued based on similar assets, location and market conditions or Direct Comparison or Comparative Sales Approach. The land value per hectare based on rural land sold in the general location provided a rate which included ground water licence. A 4% change would increase or decrease the land's fair value by approximately $69,500. There has been no unusual circumstances that may affect the value of the trees. At Level 3 the olive trees' value was assessed as at 30 June 2016 by the Directors. The fair value of the trees is at the Directors' valuation having regard to, amongst other matters, replacement cost and the trees commercial production qualities. The significant unobservable input is the replacement cost of 17 year old fruiting trees. There are no age limits to the commercial viability of an olive grove. A 1% change in the (replacement) cost would result in an increase or decrease by $3,500. There has been no unusual circumstances that may affect the value of the property. (b) Level 3 assets Olive Land trees Total $ $ $ At 1 July ,342,030 65,500 1,407,530 Addition/(Disposal) 399, ,634 At 30 June ,741,664 65,500 1,807,164 Addition/(Disposal) At 30 June ,741,664 65,500 1,807,164 (c) Fair values of other financial assets and liabilities $ $ Cash and cash equivalents 78, ,807 Receivables 20,391 6,234 99, ,041 Payables (93,026) (119,290) 6,153 27,751 Due to their short-term nature, the carrying amounts of cash, current receivables and current payables is assumed to approximate their fair value. ANNUAL REPORT 36

38 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. RECEIVABLES $ $ Receivables - 2,088 GST receivable 2,363 1,668 Other receivables 4,278 2,478 Deposits 13,750-20,391 6,234 Accounting policy Receivables are recorded at amounts due less any provision for doubtful debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when considered non-recoverable. Risk Exposure The Consolidated Entity s exposure to credit and interest rate risks is discussed in Note 9. Impaired Trade Receivables None of the Consolidated Entity's receivables are impaired or past due. 12. PROPERTY HELD FOR RESALE $ $ Property held for resale 3,797,339 3,797,339 Impairment of property (2,447,339) (2,447,339) 1,350,000 1,350,000 Critical accounting judgement and estimate Property held for development or resale was last valued by an independent qualified valuer (a Certified Practising Valuer and Associate Member of the Australian Property Institute) as at 30 June The Directors have maintained this carrying value as at 30 June 2016 and are of the view that the property is not impaired. Accounting policy Property held for resale is valued at the lower of cost and net realisable value. Cost includes the cost of acquisition, development, borrowing costs and holding costs until completion of development. Finance costs and holding charges incurred after development are expensed. Profits are brought to account on the signing of an unconditional contract of sale. 13. PROPERTY, PLANT AND EQUIPMENT Accumulated Cost Revaluation Depreciation Total 2016 $ $ $ $ Freehold land 1,117, ,775-1,741,664 Buildings 124,867 - (60,988) 63,879 Plant and equipment 1,314,630 - (1,171,678) 142,952 2,557, ,775 (1,232,666) 1,948, Freehold land 1,117, ,775-1,741,664 Buildings 124,867 - (55,808) 69,059 Plant and equipment 1,313,522 - (1,133,629) 179,893 2,556, ,775 (1,189,437) 1,990,616 ANNUAL REPORT 37

39 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 13. PROPERTY, PLANT AND EQUIPMENT (continued) Freehold land Buildings Plant and Leasehold equipment improvement Movements in Carrying Amounts $ $ $ $ $ As at 1 July ,342,030 67, , ,637,919 Revaluation/Additions 399,634 6, ,160 Disposals/Write offs (208) (208) Depreciation expense - (5,599) (48,637) (19) (54,255) As at 30 June ,741,664 69, ,893-1,990,616 Total As at 1 July ,741,664 69, ,893-1,990,616 Revaluation/Additions - - 1,107-1,107 Disposals/Write offs Depreciation expense - (5,180) (38,048) - (43,228) As at 30 June ,741,664 63, ,952-1,948,495 Critical accounting judgement and estimate Land was valued by an independent qualified valuer (a Certified Practising Valuer and Associate Member of the Australian Property Institute) as at 30 June The Directors have maintained this carrying value as at 30 June 2016 and are of the view that the Land is not impaired. In assessing the recoverable amount of the groups farm property, plant and equipment, management monitors the worldwide olive oil prices annually in determining if the Gingin olives should be harvested. As such the property, plant and equipment is carried at its written down value and continues to be depreciated as it is in a condition to be used to generate economic benefits to the group at such time as required and the assets are maintained in fair condition and therefore their recoverable amount has been assessed to be in excess of their carrying values at reporting date. Accounting policy All plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Freehold land is not depreciated. Increases in the carrying amounts arising on revaluation of land are recognised, net of tax, in other comprehensive income and accumulated in reserves in equity. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to profit or loss. It is shown at fair value, based on periodic valuations by external, independent valuers. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset s employment and subsequent disposal. The expected net cash flows have been discounted to their present value in determining the recoverable amount. ANNUAL REPORT 38

40 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 13. PROPERTY, PLANT AND EQUIPMENT (continued) Accounting policy Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Profit or Loss and Other Comprehensive Income during the financial period in which they are incurred. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each Balance Date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. Class of Fixed Asset Rate Method Buildings 7.50% Diminishing Value Plant and Equipment 5-75% Diminishing Value 14. OLIVE TREES $ $ Olive Trees - at cost 300, ,000 Revaluation (234,500) (234,500) 65,500 65,500 Critical accounting judgement and estimate There are approximately 64, year old olive trees on the 143 hectare Olive Grove located in Gingin, Western Australia. The fair value of the trees is at the Directors' valuation having regard to, amongst other matters, replacement cost and the trees commercial production qualities. Accounting policy Biological assets are initially, and subsequent to initial recognition, measured at their fair value less any estimated point-of-sale costs. Gains or losses arising on initial or subsequent recognition are accounted for via the profit or loss for the period in which the gain or loss arises. Agricultural produce harvested from the biological assets is measured at its fair value less estimated point-of-sale costs at the point of harvest. 15. PAYABLES $ $ Trade payables 28,275 23,409 Other payables and accrued expenses 64,751 67,579 Dividend payable - 28,302 93, ,290 Accounting policy These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Risk exposure The Consolidated Entity s exposure to risks arising from current payables is set out in Note 9. ANNUAL REPORT 39

41 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. PROVISIONS $ $ Employee benefits - annual leave 4,059 8,687 Employee benefits - long service leave 43,450 27,885 47,509 36,572 Accounting policy Short-term obligations Provision is made for the Consolidated Entity s liability for employee benefits arising from services rendered by employees to the Balance Date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related oncosts. Employee benefits payable later than one year from the Balance Date have been measured at the present value of the estimated future cash outflows to be made for those benefits. Employer superannuation contributions are made by the Consolidated Entity in accordance with statutory obligations and are charged as an expense when incurred. Other long-term employee benefit obligations The liability for long-service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. (a) Amounts not expected to be settled within 12 months The provision for annual leave and long service leave is presented as current since the Consolidated Entity does not have an unconditional right to defer settlement for any of these employee benefits. Long service leave covers all unconditional entitlements where employees have completed the required period of service and also where employees are entitled to pro-rata payments in certain circumstances. Based on past experience, the employees have never taken the full amount of long service leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months: $ $ Leave obligations expected to be settled after 12 months 43,450 27, ISSUED CAPITAL $ $ 15,649,228 Fully paid ordinary shares (2015: 15,860,528) 18,808,028 18,854,714 Accounting policy Ordinary shares are classified as equity. Fully paid ordinary shares carry one vote per share and the right to dividends. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. ANNUAL REPORT 40

42 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. ISSUED CAPITAL (continued) Number Movement in Ordinary shares Date of Issue of Shares $ At 1 July ,905,528 18,865,209 Share buy-back Jun-Oct 14 (10,000) (2,730) Share buy-back Jun-15 (35,000) (7,765) At 30 June ,860,528 18,854,714 Total At 1 July ,860,528 18,854,714 Share buy-back Jun-Sep 15 (211,300) (46,686) At 30 June ,649,228 18,808,028 Share Buy-Back Pursuant to an on-market share buy-back announced on 5 June 2015, the Company bought back 211,300 shares at a total cost of $46,686 and at an average buy-back cost (including brokerage) of $0.221 per share during the financial year. 18. RESERVES Asset Revaluation Reserve $ $ Revaluations of freehold land 623, ,775 Deferred tax on revaluations (187,132) (187,132) 436, ,643 Profit reserve 13, , ,643 Asset Revaluation Reserve The Asset Revaluation Reserve relates to the revaluation of the Olive Grove Land (Note 13), as assessed by an independent qualified valuer (a Certified Practising Valuer and Associate Member of the Australian Property Institute) as at 30 June There has been no movement this financial year. Profits reserve An increase in the Profits Reserve will arise when the Company or its subsidiaries generates a net profit (after tax) for a relevant financial period (i.e. half year or full year) which the Board determines to credit to the company s Profits Reserve. Dividends may be paid out of (and debited from) the company s Profits Reserve, from time to time. 19. CAPITAL RISK MANAGEMENT The Company's objectives when managing its capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure balancing the interests of all shareholders. The Board will consider capital management initiatives as is appropriate and in the best interests of the Company and shareholders from time to time, including undertaking capital raisings, share buy-backs, capital reductions and the payment of dividends. The Consolidated Entity has no external borrowings. The Consolidated Entity's non-cash investments can be realised to meet accounts payable arising in the normal course of business. ANNUAL REPORT 41

43 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. PARENT ENTITY INFORMATION The following information provided relates to the Company, Orion Equities Limited, as at 30 June Statement of profit or loss and other comprehensive income $ $ Loss for the year (383,450) (477,272) Other comprehensive income - - Total comprehensive loss for the year (383,450) (477,272) Statement of financial position Assets Cash and cash equivalents 75, ,153 Financial assets at fair value through profit or loss 718,095 1,157,369 Investment in controlled entities (at cost) Investment in associate entity (market value) 2,769,361 2,666,792 Loans to controlled entities 9,281,076 Provision for impairment (5,526,275) Net loans to controlled entities 3,754,801 3,798,465 Other asset 30,189 34,286 Total assets 7,348,072 7,790,365 Liabilities Current liabilities 116, ,945 Non current liabilities 610, ,286 Total liabilities 727, ,231 Net assets 6,620,999 7,051,134 Issued capital 18,808,028 18,854,714 Accumulated losses (12,187,029) (11,803,580) Equity 6,620,999 7,051,134 Loans to controlled entities are in relation to amounts owed by subsidiary companies, Silver Sands Developments Pty Ltd, Koorian Olives Pty Ltd and CXM Pty Ltd, at the reporting date. A provision for impairment has been recognised where the balance of the loan exceeds the net assets of the relevant subsidiary company. No interest is charged on outstanding balances. 21. INVESTMENT IN CONTROLLED ENTITIES Ownership Interest Subsidiaries Incorporated % % Silver Sands Developments Pty Ltd Australia Koorian Olives Pty Ltd Australia CXM Pty Ltd Australia Margaret River Wine Corporation Pty Ltd Australia Margaret River Olive Oil Company Pty Ltd Australia ANNUAL REPORT 42

44 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 21. INVESTMENT IN CONTROLLED ENTITIES (continued) Accounting policy Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated Entity controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated from the date that control ceases. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the Consolidated Entity, including any unrealised profits or losses, have been eliminated on consolidation. Changes in Ownership Interests When the Consolidated Entity ceases to have control, any retained interest in the entity is re-measured to its fair value with the change in carrying amount recognised in profit or loss. The fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Consolidated Entity has directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. 22. INVESTMENT IN ASSOCIATE ENTITY Ownership Interest $ $ Bentley Capital Limited (ASX:BEL) 27.20% 27.42% 3,452,593 3,510,526 Accounting policy Associates are all entities over which the Consolidated Entity has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates in the consolidated financial statements are accounted for using the equity method of accounting. On initial recognition investment in associates are recognised at cost, for investments which were classified as fair value through profit or loss, any gains or losses previously recognised are reversed through profit or loss. Under this method, the Consolidated Entity s share of the post-acquisition profits or losses of associates are recognised in the consolidated Statement of Profit or Loss and Other Comprehensive Income, and its share of post-acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the Company s Statement of Profit or Loss and Other Comprehensive Income, while in the Statement of Financial Position they reduce the carrying amount of the investment. When the Consolidated Entity s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Consolidated Entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. ANNUAL REPORT 43

45 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 22. INVESTMENT IN ASSOCIATE ENTITY (continued) Unrealised gains on transactions between the Consolidated Entity and its associates are eliminated to the extent of the Consolidated Entity s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Consolidated Entity. All associated entities have a June financial year-end Movements in carrying amounts $ $ Opening balance 3,510,526 3,892,016 Share of net profit/(loss) after tax 147,205 (73,783) Dividend received (205,138) (307,707) Closing balance 3,452,593 3,510,526 Fair value of listed investment in Associate 2,769,361 2,666,792 Net asset value of investment 4,430,471 4,504,830 Summarised statement of profit or loss and other comprehensive income Revenue 3,258,497 2,398,085 Expenses (2,732,417) (2,665,385) Profit/(Loss) before income tax 526,080 (267,300) Income tax expense - - Profit/(Loss) after income tax 526,080 (267,300) Other comprehensive income - - Total comprehensive income 526,080 (267,300) Summarised statement of financial position Current assets 13,159,280 6,565,383 Non-current assets 3,430,001 10,524,117 Total assets 16,589,281 17,089,500 Current liabilities 291, ,394 Non-current liabilities 9, ,969 Total liabilities 301, ,363 Net assets 16,287,721 16,426,137 Lease commitments Not longer than one year 32,083 56,035 Longer than one year but not longer than five years - 32,083 32,083 88,118 ANNUAL REPORT 44

46 30 JUNE 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ORION EQUITIES LIMITED 23. RELATED PARTY TRANSACTIONS (a) Ultimate Parent Company ASX listed entity Queste Communications Ltd (ASX:QUE) is deemed to have control of the Consolidated Entity as it holds 59.86% (9,367,653 shares) (2015: 59.06% and 9,367,653 shares) of the Company's total issued share capital. (b) Transactions with Related Parties During the financial year there were transactions between the Company, QUE and Associate Entity, Bentley Capital Limited (ASX:BEL), pursuant to shared office and administration arrangements. There were no outstanding amounts at the reporting date. The following related party transactions also occurred during the financial year: Bentley Capital Limited $ $ Dividend Received 205, ,707 (c) Transactions with key management personnel (KMP) Refer to the Remuneration Report contained in the Directors' Report for details of the remuneration paid or payable to each member of the Consolidated Entity's KMP. The total remuneration paid to KMP of the Consolidated Entity during the year is as follows: Directors $ $ Short-term employment benefits 310, ,028 Post employment benefits 27,110 1, , ,951 During the year, the Consolidated Entity received $44,200 rental income from a KMP/close family member of a KMP (the KMP being Director, Farooq Khan), pursuant to a standard form residential tenancy agreement in respect of the Property Held for Resale (2015: $44,200). The rental is in respect of a fixed term of 12 months (to 31 May) with the monthly rental being $3, AUDITORS' REMUNERATION During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and by non-related audit firms: Rothsay Auditing $ $ Audit and Review of Financial Statements 22,000 - BDO Audit (WA) Pty Ltd Audit and Review of Financial Statements ,883 Taxation Services 2,901 5,858 25,451 40,741 The Company changed its Auditors from BDO Audit (WA) Pty Ltd to Rothsay Auditing with effect on 12 February ANNUAL REPORT 45

47 30 JUNE 2016 ORION EQUITIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25. COMMITMENTS $ $ Not longer than one year 32,083 56,035 Longer than one year but not longer than five years - 32,083 32,083 88,118 On or about 19 May 2015, the Consolidated Entity renewed its non-cancellable operating lease agreement for shared office accommodation. The lease was for a further 18 month term expiring on or about 30 January The lease commitment is the Consolidated Entity's share of the lease costs and includes all outgoings (inclusive of GST). Accounting policy Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease. 26. CONTINGENCIES (a) Directors' Deeds The Company has entered into Deeds of Indemnity with each of its Directors indemnifying them against liability incurred in discharging their duties as Directors/Officers of the Consolidated Entity. At the end of the financial period, no claims have been made under any such indemnities and accordingly, it is not possible to quantify the potential financial obligation of the Consolidated Entity under these indemnities. (b) Tenement Royalties The Consolidated Entity is entitled to receive a royalty of 2% of gross revenues (exclusive of GST) from any commercial exploitation of any minerals from the Paulsens East (Iron Ore) Project tenement (currently a Retention Licence RL 47/7) in Western Australia currently held by Strike Resources Limited (ASX:SRK). 27. EVENTS OCCURRING AFTER THE REPORTING PERIOD (a) Associate entity, Bentley Capital Limited (ASX:BEL), has announced its intention to pay a fullyfranked dividend of 0.50 cent per share in September The Company s entitlement to such dividend would be $102,569. No other matter or circumstance has arisen since the end of the financial year that significantly affected, or may significantly affect, the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years. ANNUAL REPORT 46

48 30 JUNE 2016 ORION EQUITIES LIMITED DIRECTORS DECLARATION The Directors of the Company declare that: (1) The financial statements, Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Equity, and accompanying notes as set out on pages 17 to 46 are in accordance with the Corporations Act 2001 (Cth) and: (a) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting; and (b) give a true and fair view of the Consolidated Entity s financial position as at 30 June 2016 and of their performance for the year ended on that date; (2) In the Directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (3) The Directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth) by the Executive Chairman (the person who, in the opinion of the Directors, performs the Chief Executive Officer function) and Company Secretary (the person who, in the opinion of the Directors, performs the Chief Financial Officer function); and (4) The Company has included in the notes to the Financial Statements an explicit and unreserved statement of compliance with the International Financial Reporting Standards. This declaration is made in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001 (Cth). Farooq Khan Chairman Victor Ho Company Secretary 31 August 2016 ANNUAL REPORT 47

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51 30 JUNE 2016 ORION EQUITIES LIMITED ADDITIONAL ASX INFORMATION as at 20 October 2016 INVESTMENT PORTFOLIO As at 30 June 2016 Equities Fair Value $ m % Net Assets ASX Code Industry Sector Exposures Bentley Capital Limited % BEL Diversified Financials Strike Resources Limited % SRK Materials CBG Australian Equities Fund (Wholesale) (CBG Fund) % Unlisted Diversified Miscellaneous listed securities % Various Various TOTAL % As at 30 September 2016 Equities Fair Value $ m % Net Assets ASX Code Industry Sector Exposures Bentley Capital Limited % BEL Diversified Financials Strike Resources Limited % SRK Materials CBG Fund % Unlisted Diversified Miscellaneous listed securities % Various Various Note: TOTAL % (1) The Company s investment in BEL, an Associated Entity (i.e. in which the Company has a greater than 20% interest), is accounted for under the equity method in the consolidated financial statements. Under the equity method, the carrying amount of such investment is cost plus a share of the Associate Entity s net profit or loss (after tax) for the financial year to balance date as provided to the Company by such Associated Entity (refer Note 22 (Investment in Associate Entity) at pages 43 and 44 of the 2016 Annual Report). TRANSACTIONS AND BROKERAGE During the financial year ended 30 June 2016, the Company entered into ~43 (2015: ~96) transactions with stock brokers for the purchase and sale of securities, incurring brokerage fees totalling ~$2,274 (2015: ~$5,072). The Company reinvested an annual income distribution from the CBG Fund (2015: one investment into the fund). No entry or exit fees are applicable to the CBG Fund. CORPORATE GOVERNANCE STATEMENT The Company has adopted the Corporate Governance Principles and Recommendations (3 rd Edition, March 2014) issued by the ASX Corporate Governance Council in respect of the financial year ended 30 June Pursuant to ASX Listing Rule , the Company s 2016 Corporate Governance Statement (dated on or about 21 October 2016) and ASX Appendix 4G (Key to Disclosures of Corporate Governance Principles and Recommendations) can be found at the following URL on the Company s Internet website: ANNUAL REPORT 50

52 30 JUNE 2016 ORION EQUITIES LIMITED ADDITIONAL ASX INFORMATION as at 20 October 2016 DISTRIBUTION OF FULLY PAID ORDINARY SHARES Spread of Holdings Number of Holders Number of Shares % of Total Issued Capital 1-1, , % 1,001-5, , % 5,001-10, , % 10, , ,207, % 100,001 - and over 15 12,723, % TOTAL ,649, % UNMARKETABLE PARCELS Spread of Holdings Number of Holders Number of Shares % of Total Issued Capital 1-3, , % 3,125 - over ,459, % TOTAL ,649, % An unmarketable parcel is considered, for the purposes of the above table, to be a shareholding of 3,124 shares or less, being a value of $500 or less in total, based upon the Company s last sale price on ASX as at 20 October 2016 of $0.16 per share. VOTING RIGHTS Subject to any rights or restrictions for the time being attached to any class or classes of shares (at present there are none), at meetings of shareholders of the Company: Each shareholder entitled to vote may vote in person or by proxy or by power of attorney or, in the case of a shareholder which is a corporation, by representative; Every person who is present in the capacity of shareholder or the representative of a corporate shareholder shall, on a show of hands, have one vote; and Every shareholder who is present in person, by proxy, by power of attorney or by corporate representative shall, on a poll, have one vote in respect of every fully paid share held by him. ANNUAL REPORT 51

53 30 JUNE 2016 ORION EQUITIES LIMITED ADDITIONAL ASX INFORMATION as at 20 October 2016 TOP 20 ORDINARY, FULLY PAID SHAREHOLDERS RANK SHAREHOLDER TOTAL SHARES % ISSUED CAPITAL 1* QUESTE COMMUNICATIONS LTD 9,367, % 2* CLEOD PTY LTD 506,000 CELLANTE SECURITIES PTY LIMITED 417,038 Sub-total 923, % 3 DR STEVEN G RODWELL 525, % 4 MR SEAN DENNEHY 278, % 5 REDSUMMER PTY LTD 225, % 6 MR STEPHEN JAMES LAMBERT & MRS RUTH LYNETTE LAMBERT & MR SIMON LEE LAMBERT 200, % 7 MS HOON CHOO TAN 197, % 8 MRS PENELOPE MARGARET SIEMON 181, % 9 MR BRUCE SIEMON 172, % 10 MR JOHN STEPHEN CALVERT 171, % 11 VIKAND CONSULTING PTY LTD 144, % 12 MRS TAMI ELSIE VARNEY 121, % 13 MR ANTHONY NEALE KILLER & MS SANDRA MARIE KILLER 14 MR JOHN CHENG-HSIANG YANG & MRS PEGA PING PING MOK 120, % 103, % 15 MRS CAROLINE ANN PICKERING 100, % 16 MS MORAG HELEN BARRETT 94, % 17 MR DAMIAN GERARD BOWDLER & MRD MARGARET CLARE BOWDLER 85, % 18 MR KEVIN LEDGER & MRS ROBIN LEDGER 85, % 19 GIBSON KILLER PTY LTD 80, % 20 MR LUKE FREDERICK ATKINS 74, % * Substantial shareholders of the Company TOTAL 13,251, % ANNUAL REPORT 52

54 ASX Code: OEQ ORION EQUITIES LIMITED PRINCIPAL & REGISTERED OFFICE: Level 2 23 Ventnor Avenue West Perth, Western Australia 6005 T (08) F (08) E info@orionequities.com.au W SHARE REGISTRY: Advanced Share Registry Services Western Australia Main Office 110 Stirling Highway Nedlands, Western Australia 6009 PO Box 1156, Nedlands Western Australia 6909 T (08) F (08) E admin@advancedshare.com.au W New South Wales Branch Office Suite 8H, 325 Pitt Street Sydney, New South Wales 2000 PO Box Q1736, Queen Victoria Building New South Wales 1230 T (02) T (03) T (07) Victoria Queensland